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WTO raises global merchandise trade growth estimate to 3.6% for 2017

The World Trade Organisation (WTO) has raised its estimate for growth in world merchandise trade volume for this year to 3.6%.

The previous estimate for 2017 was 2.4%, although this was set within a range of between 1.8% and 3.6%, reflecting the high level of economic and policy uncertainty.

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The new estimate puts the focus on the top end of that range. Growth of 3.6% would represent a substantial improvement on the lacklustre 1.3% growth in 2016.

Reflecting the continued forecast risk arising from deep uncertainty about near-term economic and policy developments, the range of estimates for world trade growth has been adjusted to between 3.2% and 3.9%.

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Stronger growth for this year was attributed to a resurgence of Asian trade flows as intraregional shipments picked up and as import demand in the US recovered after stalling in 2016.

“The improved outlook for trade is welcome news, but substantial risks that threaten the world economy remain in place and could easily undermine any trade recovery,” WTO director-general Roberto Azevêdo said.

He added that these risks included the possibility that protectionist rhetoric translates into trade restrictive actions, a worrying rise in global geopolitical tensions and a rising economic toll from natural disasters.

“Though difficult to quantify, these risks are very real. As a result, increased optimism about trade should be tempered with a healthy dose of caution,” he said.

Meanwhile, the WTO said the strength of the revision was partly owing to a modest improvement in the consensus forecast for global gross domestic product (GDP) growth, at 2.8%, at market exchange rates, up from 2.3% in 2016, and partly owing to the composition of that growth.

GDP growth accelerated in most major economies in the second quarter, most notably in China, where quarter-on-quarter growth rose from 1.3% in the first quarter to 1.7% in the second quarter.

Growth also strengthened in the US from 1.2% annualised in the first quarter to 3% in the third quarter.

Stronger growth, particularly in China and the US, boosted demand for imports, which spurred greater intra-Asia trade as demand was transmitted through regional supply chains.

Chinese demand in the first half of this year was driven by solid growth in industry and even stronger growth in services.

Financial conditions in Asia also improved compared with the volatile first quarter of 2016, contributing to higher business and consumer confidence.

OUTLOOK FOR 2018

Trade growth is, however, expected to moderate to about 3.2% in 2018.

“The rapid pace of trade growth in 2017 is unlikely to be sustained next year for many reasons. First, trade growth in 2018 will not be measured against a weak base year, as is the case this year.

“Second, monetary policy is expected to tighten in developed countries as the Federal Reserve gradually raises interest rates in the US and the European Central Bank looks to phase out quantitative easing in the euro area.

Third, fiscal expansion and easy credit in China are likely to be reined in to prevent the economy from overheating,” the WTO said.